Saturday, December 17, 2005

CBPP Report: The Application of the Expected Across-the-Board Appropriations Cut to Defense is Likely to be Purely Cosmetic

WASHINGTON, Dec. 16 /U.S. Newswire/ -- Application of an anticipated one percent across-the-board appropriations cut to the Defense Department in the next few days is likely to be illusory, according to the Center on Budget and Policy Priorities. Defense funds that are reduced through the across- the board cut now are likely to be fully restored next spring, when a supplemental appropriation for Iraq is enacted. Based on past Iraq supplementals, the supplemental is likely to be structured in a way that allows the Pentagon to move funds around and undo the across-the-board cut.
Discussion
The Congressional leadership is likely to apply an across-the- board cut in the next few days to funding for almost all annually appropriated or "discretionary" programs, including both defense and domestic programs. (Certain programs, such as medical care for veterans, will likely be exempted from the cut.) The across- the-board cut is likely to be attached to the pending defense appropriations bill, but the cut's scope will extend to all of the other 2006 appropriations bills. If the cut is set at one percent, it will reduce 2006 funding by approximately $8.6 billion. (1)
Including defense in any across-the-board cut of discretionary programs seems fair and sensible. (The cut will likely exclude $50 billion in funds needed for operations in Iraq and Afghanistan.) Defense, along with international and homeland security funding, has accounted for most or all of the growth in discretionary programs since 2001. (2)
-- Adjusting for inflation and the growth of the U.S. population, funding for defense, international affairs, and homeland security has grown at an average rate of 9.5 percent per year since 2001, while funding for domestic programs has grown at an average rate of 1.9 percent per year.
-- Funding for defense, international affairs, and homeland security has grown from 3.4 percent of Gross Domestic Product in 2001 to 4.6 percent in 2005. By contrast, funding for domestic discretionary programs stood at 3.4 percent of GDP in both 2001 and 2005; as a share of GDP, it has not grown at all.
Yet the across-the-board cut that is being planned is likely to have little or no effect on the actual level of funding that defense programs ultimately receive in 2006. There inevitably will be a large supplemental appropriations bill next year to fund ongoing operations in Iraq (in addition to the $50 billion for Iraq that is likely to be included in the pending Defense appropriations bill). Next year's Iraq supplemental bill almost certainly will include additional funds that could effectively be used to restore any reductions in funding that result from applying an across-the-board cut to defense programs now, even if the supplemental bill does not specifically state that the funds being provided can or should be used for that purpose.
-- Such supplemental funding is generally provided to a wide range of Department of Defense accounts, with the extra funds available for any obligations incurred by that account.
-- In addition, the Defense Department has authority to transfer significant amounts from one account to another.
-- As a result, some supplemental funds ostensibly intended for operations in Iraq could be used to backfill shortages in routine DoD activities.
Applying an across-the-board cut to defense as well as domestic programs is politically useful now for the House Republican leadership -- it permits the Leadership to speak of a larger total cut (between $8 billion and $9 billion) when talking with very conservative members of its caucus who are looking for the largest possible reduction. It also enables the Leadership to reassure moderates in the caucus that domestic programs are not being singled out for cuts.
In reality, however, the President and Congress will likely reverse the reduction when they provide supplemental funding for Iraq in coming months. When designing a supplemental appropriations bill next spring, the Administration is sure to request whatever funds it believes it needs for all defense purposes, whether for operations in Iraq or other Pentagon activities. Congress has shown little or no inclination in the past to reduce military funding below the Administration's request.
This full analysis can be found at: http://www.cbpp.org/12-16-05bud.pdf
For additional information on the proposed across-the-board cut to discretionary programs, visit: http://www.cbpp.org/12-8-05bud2.pdf
EDITOR'S NOTE: Robert Greenstein, executive director of the Center on Budget and Policy Priorities, will be available for comment over the weekend.
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Notes:
(1) Our estimate that a one percent across-the-board funding cut would amount to $8.6 billion assumes that "obligation limits" in transportation programs are subject to the cut (as they have been in all prior instances) and are counted as funding for this purpose. It also assumes that emergency funding of about $50 billion for the Iraq and Afghanistan wars, to be included in the defense appropriations bill, and funding for veterans' medical care and research of about $28 billion will be exempt from the cut.
(2) See Have Domestic Appropriations Exploded? CBPP, December 8, 2005, available at http://www.cbpp.org/12-8-05bud3.pdf
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